Harry Potter magic casts spell on HMV trading

HMV Group, the books and music retailer, said it had bounced back from the dip in trading it suffered at the end of the last financial year which it said had been caused by the war in Iraq.

Reporting full-year figures, for the year ended 26 April, the company, which owns the HMV music chain and Waterstone's bookshops, said current trading had shown an improvement on the final quarter of that last financial year. There was a 1.4 per cent decline in like-for-like sales in that fourth quarter.

For the first eight weeks of the new financial year, to 21 June, there was like-for-like growth of 0.9 per cent. However, this was not enough to satisfy analysts, who noted that current trading was up against an easy comparative period last year - when the football World Cup kept people away from shops.

Alan Giles, the company's chief executive, said: "In February, March and April there were extremely low levels of consumer confidence, brought on by the war with Iraq. That diminished the inclination to go shopping. May and June saw a gradual improvement in confidence. We have no reason to believe that won't continue."

Current trading was significantly boosted by sales of the new Harry Potter book, though just the first day of sales of that title were included. The new financial year at Waterstone's saw sales up 7.2 per cent - or 3.4 per cent excluding Harry Potter, which represented a retailing phenomenon on 21 June, it first day of sales. Current HMV like-for-like sales were up 1.6 per cent, or 7.4 per cent on an absolute basis, driven by new store openings.

For the year to 26 April, underling pre-tax profits climbed 21 per cent to £96.5m. Like-for-like sales growth was 1.6 per cent, with HMV up 1.9 per cent and Waterstone's up 0.9 per cent. These were the first full-year figures HMV has presented following its flotation last year. Mr Giles said the company had "delivered what we said we'd do when we came to the market". He added that more needed to be done to revamp Waterstone's. It has just completed the first year of a three-year restructuring programme.

Tim Waterstone, founder of the book business, has criticised the more commercial path the book shop has followed since he stopped running it in the early 1990s but Mr Giles said there was, "no contradiction between selling to discerning customers and aggressively competing in the mainstream". Waterstone's, like other retailers, opened at midnight on 21 June.